Small Business Startup & Survival

The Credit Process

Agenda

• Who am I• The five “Cs” of credit• Apply for a loan; Important Factors• Types of Loans• Loan Costs• The SBA’s role• After Loan Closing• Helpful Links

Who am I

• SVP and Manager of Commercial Banking for Genesee Regional Bank

• 16 years of banking experience, most on the commercial lending side

The Five “Cs” of Credit

• Capacity – to repay the loan; Most critical

• Capital – your investment; “skin in the game”

• Collateral – security for loan

• Conditions – purpose of loan

• Character – background; experience; trustworthy

The Credit Process – Loan Application

• Information Needed: Loan application; business plan; financial information

• Timeline: Varies – weeks to months

• Advisors of the applicant: who your team is can influence the outcome

The Credit Process – Types of Loans

• Line of Credit – Short term working capital use

• Term Loan – Equipment; Leasehold Improvements; Permanent working capital

• Mortgage – Long term fixed asset acquisition (i.e., building)

• Lease - Equipment

• Letters of Credit – International use

The Credit Process – Loan Costs

• Direct Costs– Interest rate: fixed or variable– Origination fees; processing fees– Loan guaranty fees (i.e., SBA fee)– Appraisal and environmental fees– Attorney and other closing costs

• Indirect Costs– Periodic financial reporting– Covenants

Credit Process – The Role of the SBA

• Provide the Bank additional comfort to mitigate some weakness of the credit request such as insufficient collateral, new business or no historical cash flow, etc.

• The SBA guaranty does not mean the Bank has zero risk in the transaction.

The Credit Process – Post Loan Closing

• Communicate, communicate, communicate!!!!!!!

• Be open to your banker with good and bad news. If your banker does not know about an issue, he or she can not assist you!

• Use your banker as a business tool – Networking, advice, leads for your business

Helpful Links

• www.geneseeregionalbank.com• www.sba.gov• www.growmonroe.com• www.cityofrochester.gov• www.nybdc.com• www.newyorkfed.org/education/addpub/cr

edit.html• Other bank websites